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The Gleason Company, a division of a large international company, has two production departments, Machining and Assembly, and two support departments, namely, Factory Administration and
The Gleason Company, a division of a large international company, has two production departments, Machining and Assembly, and two support departments, namely, Factory Administration and Cafeteria. The estimated building and grounds costs for the coming year would be $41,010. The following are the cost estimates for next year that can be traced to each department: Direct costs Factory Administration Cafeteriaa Machining Assembly 78,270 4,920 104,100 146,700 $ 333,990 Company management would like to know the estimated total allocated product cost per unit. These costs will be used as a benchmark for future period operations. The following information is available and can be used as a possible allocation base. The difference between direct labour hours and total labour hours represents hours of supervisory labour or labour hours that are used indirectly for manufacturing. The cost of these hours in machining and assembly is part of manufacturing overhead Department Direct labour Number of Square Total labourNumber of employees metres 2 500 2 1,000 4 3,500 5 5,000 13 10,000 hourspurchase orders 500 4,000 2,000 1.000 .500 hours Factory Administration Cafeteria Machining Assembly Total 1,000 3,000 6,000 10,000 1,000 8,000 10,000 19,000 Required: Show all your workings. Round allocation ratios (i.e. relative proportion of the support department's services consumed by the user's department) and overhead rates to 4 decimal places, and cost to the nearest dollar. Il Assume the company uses number of employees as an allocation base for both support departments, calculate the support department costs allocated to each production department using the step-down method, and then calculate an overhead rate per direct labour hour for each production department. Assume the Factory Administration cost is allocated first. (11 marks) IV. Assume that Factory Administration costs are allocated based on total labour hours. List one advantage and one disadvantage of using such allocation base to allocate 4 marks) the Factory Administration costs to other departments
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